April 01, 2010

Government Hit With $89 Million In Nuclear Fuel Damages

Add another $89 million to the government’s tab for breaching contracts with nuclear utilities to begin the pick-up of their spent fuel in 1998.

Chief Judge Emily Hewitt of the U.S. Court of Federal Claims made the damages award on Tuesday to Pacific Gas & Electric, represented by Jerry Stouck, shareholder in the Washington office of Greenberg Traurig. The case was back before Hewitt on remand for a recalculation of damages following the utility’s success on key contract issues before the U.S. Court of Appeals for the Federal Circuit.

“This is great news,” said Stouck, who has been representing a number of utilities with claims against the government. “We had asked for basically the same amount originally.”

On remand in Pacific Gas & Electric v. U.S., the claims court conducted four and a half days of trial and took the testimony of 10 witnesses last October. In her opinion Tuesday, Chief Judge Hewitt concluded that the costs claimed as damages by PG&E were incurred as a “direct and reasonably foreseeable result” of the government’s partial breach of the contract.

The damages awarded are for costs incurred through 2004. “There’s a lot more coming,” said Stouck, adding that he intends to seek damages for the period 2005 to present, as the government has yet to perform under the contracts.

“The government has done a great job,” he added, explaining, “It has been 12 years since the 1998 contractual start date. They literally haven’t paid a dime with one quirky exception. They’ve basically lost all of the legal issues. Time is running.”

More than $1 billion has been awarded in damages and settlements. To date, utilities have filed 71 breach-of-contract cases in the claims court. With liability established, the utilities and the government have been fighting primarily about damages.

The utilities seek damages largely for the costs of storing the fuel, often on site, costs they would not have had if the government had performed in a timely manner.

The Department of Energy's most recent estimate of the government's potential liability is $12.3 billion, based on a pickup date of 2020. But the industry estimates damages claims ultimately will total about $50 billion.

“At some point in the next year or two, either the government will agree the emperor has no clothes or I don’t know what they’re going to do,” said Stouck. “They’re going to have to start paying these judgments.”